Nursing home profits soar as patient care declines

The profits of aged care homes surged 40 per cent in the past year as operators cut hours of nursing care while claiming higher payments from the federal government for servicing more of the most frail patients.

The earnings boom in the sector comes after the government introduced widespread reforms of aged care in 2014, including deregulating fees and lifting restrictions on the accommodation bond that nursing homes can levy on residents.

It also coincides with a spike in false claims by aged care home providers for government subsidies, which rise based on the level of need of the patient.

According to the latest annual survey of aged care homes by Bentleys Chartered Accountants, the average profit before interest and tax increasing from $4497 per resident per annum in 2014 to $6278 in 2015.

At the same time, the average bond – known as a refundable accommodation deposit – also rose by 40 per cent – from $154,116 to $217,839.

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The deposit – which must be paid back after the resident dies – is effectively an interest-free loan to the aged care home operator.

Heath Shonhan, a business advisory partner at Bentleys attributed the profit surge to three factors – a one-off increase of 2.4 per cent in government subsidies, free market pricing of accommodation deposits and a rise in the average frailty of patients.

"[Patients] are a lot frailer and their care needs are higher so they are trending towards the higher end of the funding spectrum," he said.

Mr Shonhan said the rising infirmity of nursing home residents reflected a trend toward the elderly staying in their homes for longer as they access better home care services.

However, the federal government this month revealed it was becoming increasingly concerned that aged care operators were rorting the $10.6 billion Aged Care Funding Instrument (ACFI).

The basic rate of the ACFI subsidy is $36.11 per day for low-care residents, rising to $78.62 for medium- and $108.92 for high-care residents.

One in eight claims audited by the government last financial year were incorrect, leading to an unexpected $150 million blowout in the aged care budget. False claims this financial year are tracking at one in seven.

In response, the federal government announced new fines of up to $10,800 for providers who repeatedly make false claims.

Yet while nursing homes report they are looking after more needy residents, the time spent caring for them declined by 7 per cent over the past year.

In 2015, hours by care staff (nurses, care assistants and therapists) fell from 42.71 hours per fortnight to 39.80 hours per fortnight.

At 2.8 hours a day, the average is well below the minimum of 4.5 hours per day of nursing care mandated in the US, said Lynda Saltarelli from the Aged Care Crisis advocacy group.

"Australia has no recommended levels for staffing," she said. "Over half of all nursing homes in Australia have nursing levels so low that most residents suffer harm."

"There's a huge increase in profitability but there's no evidence that the quality of aged care is increasing," he said.

But Mr Shonhan, from Bentleys ,said the reforms were working well. Consumers had more choice and more options to pay for aged care. Meanwhile, operators could provide better amenities and were becoming more efficient.

"They can do more with less," he said. "This is absolutely efficiency."

The Bentleys survey has been running for 20 years and compiles data from more than 150 profit and not-for-profit homes.